Eng v. Cummings

Citation611 F.3d 428
Decision Date09 July 2010
Docket NumberNo. 09-2426.,09-2426.
PartiesPatrick J. ENG; Matthew B. Woods; Douglas F. Pugh; Thad R. Mulholland; Jonathan D. McQuilkin, Appellees,v.CUMMINGS, McCLOREY, DAVIS & ACHO, PLC, Appellant.
CourtUnited States Courts of Appeals. United States Court of Appeals (8th Circuit)

611 F.3d 428

Patrick J. ENG; Matthew B. Woods; Douglas F. Pugh; Thad R. Mulholland; Jonathan D. McQuilkin, Appellees,
v.
CUMMINGS, McCLOREY, DAVIS & ACHO, PLC, Appellant.

No. 09-2426.

United States Court of Appeals,
Eighth Circuit.

Submitted: Feb. 9, 2010.
Filed: July 9, 2010.


611 F.3d 429
Robert L. Blamer, Cummings, McClorey, Davis & Acho, P.L.C., Livonia, MI, argued (Susan Lumetta, on the brief), for appellant.

Mark T. Kempton, Kempton and Russell, Sedalia, MO, argued, for appellees.

Before RILEY, Chief Judge,1 SMITH and SHEPHERD, Circuit Judges.

SHEPHERD, Circuit Judge.

Patrick Eng, individually and on behalf of his partners in the Missouri law firm of Eng & Woods (collectively “Eng & Woods”), filed a declaratory judgment action against Cummings, McClorey, Davis & Acho, PLC (“CMDA”), a Michigan law firm, seeking a judgment that Eng & Woods need not share a portion of the attorney's fees awarded to the firm in a personal injury action. CMDA cross-claimed to recover one-third of the fee award. The district court 2 granted summary

611 F.3d 430
judgment in favor of Eng & Woods. We affirm.
I.

We recite the facts in the light most favorable to CMDA. See Dovenmuehler v. St. Cloud Hosp., 509 F.3d 435, 437 (8th Cir.2007). In November 2006, Ernie Fazio, a long-time client of CMDA attorney James Acho, called Acho to inform him that Fazio's sister-in-law, Beverly Townsend, and her husband, Douglas Townsend, had been killed in a motor vehicle accident in Missouri. The purpose of Fazio's call was to ensure that CMDA would represent two of Beverly's children, Michael Richina and Khemya MitRahina, in any lawsuit arising from the accident. Fazio indicated that he had a close relationship with Richina and asked Acho to take care of him.

Acho spoke with Richina the following day, who indicated that he wanted CMDA to handle any suit arising from the accident. Richina agreed that CMDA would either pursue the lawsuit in Missouri or refer the case to a Missouri law firm, although Richina never signed a representation agreement with CMDA. Acho decided that CMDA would not try the case itself and began researching Missouri firms to refer the case to, eventually settling on Eng & Woods. Acho called Patrick Eng, a founding partner at Eng & Woods, and the two agreed that Eng & Woods would handle the case. According to Acho, Eng also agreed that CMDA would retain one-third of the fees that Eng & Woods garnered from the case, a fact that Eng & Woods vigorously disputes. Acho put Eng in touch with Richina and, on November 16, 2006, both Richina and MitRahina entered into contingent fee contracts with Eng & Woods. In the contracts, Eng & Woods agreed to represent Richina and MitRahina in any case arising out of the death of their mother, in exchange for one-third of all sums recovered. Neither contract made any mention of any agreement with Acho or CMDA.

On December 1, 2006, Acho sent a letter to Eng purporting to memorialize the alleged agreement they had made. It stated:

This letter will serve as a follow-up to our phone conversations of the past two weeks. First, please accept my sincere thanks for agreeing to take on this tragic case. Anytime individuals lose their lives, a case takes on more significance and it makes us fight just that much harder. Your client, Mike [Richina], was referred to me by his uncle, Ernie Fazio, who has been my client for several years. I in turn contacted you via the recommendation of my father, Ronald Acho, who holds you in high regard.
As we agreed on the phone, this firm will retain a one-third (33 1/3%) consulting fee against any recovery Eng & Woods garners on behalf of Mike [Richina], or any other party the firm represents as a result of the action. We understand, of course, that the fee is after your actual costs. I will work with you on the case as liaison, keeping in constant communication with Ernie Fazio, and when necessary, Mike [Richina]. I will also be on call at any time for you or your partner, should you need any assistance.
If you have any questions or concerns, or if this is not an accurate recital of our understanding, please contact me at once. I look forward to working with you, and eventually bringing this to a successful resolution.

(Appellant's Add. 17.) 3 Eng received this letter and discussed it with his partner,
611 F.3d 431
Matthew Woods, but took no action on it. On December 1, Acho also sent a letter to Richina, confirming that CMDA had referred Richina's case to Eng & Woods and reiterating the alleged one-third fee agreement Acho argues he made with Eng & Woods. ( See id. at 18.) Acho made clear that this one-third fee agreement would not affect the overall amount of Richina's recovery.

Eng & Woods pursued the wrongful death claim in Missouri state court, with Woods acting as lead counsel for Richina and MitRahina.4 Acho received occasional oral updates on the status of the case from Eng and relayed this information to Fazio and Richina. Acho also offered to fly in to help with depositions, but Eng told Acho that he had already done enough as a conduit to receive his fee. The case settled in December 2007 for a total of $1,875,000, with $562,500 going to each Richina and MitRahina.5 From those amounts, the court directed Richina and MitRahina each to pay $187,500 in attorney's fees to Eng & Woods, for a total fee award of $375,000. At the time the settlement distributions were made, Richina asked Eng if Acho would be receiving a portion of the fee, and Eng replied that Acho would get one-third of the fee paid to Eng & Woods.

In January 2008, after hearing that the case had settled, Acho contacted Eng about payment of his portion of the attorney's fee award, first via telephone and then in a letter dated January 22, 2008. Acho argues that Eng acknowledged in this telephone call that there had been a fee arrangement, though Eng was not sure of the exact amount. The same day that Eng received Acho's January 22 letter, Woods sent Acho a check in the amount of $18,562.50 “in consideration for the contact information for purposes of obtaining Mr. Richina's case.” This amount represented 10% of the fee from Richina, or 5% of Eng & Woods's entire fee from the case. Following his receipt of this check, Acho called Eng and the two had a heated argument about the amount of their fee arrangement. During this conversation, Eng told Acho that he would stop payment on the check unless Acho agreed to accept it. Acho agreed to accept the check but told Eng that he expected another check for the difference owed him under the alleged agreement. Eng stopped payment on the check.

Eng & Woods filed a declaratory judgment action against CMDA in federal court in May 2008, seeking a declaration that CMDA had no right to any portion of the attorney's fees recovered by Eng & Woods from Richina and MitRahina. CMDA counter-claimed for breach of contract, fraud and misrepresentation, unjust enrichment, and bad faith breach of duty. The parties filed cross-motions for summary judgment. The district court granted summary judgment for Eng & Woods, holding that, even if an agreement existed between Eng and Acho, the agreement was unenforceable under Missouri law because it did not comply with the Missouri Rules of Professional Conduct. The court also held that CMDA's counterclaims failed as a matter of law due to the unenforceability

611 F.3d 432
of the alleged fee agreement under Missouri law.
II.

CMDA appeals the district court's grant of summary judgment in favor of Eng & Woods. First, CMDA argues that a fee-splitting agreement existed between Acho and Eng and that this agreement complied with both the letter and the purpose of the Missouri Rules of Professional Conduct. Second, CMDA argues that, even if we find the fee-splitting agreement unenforceable, it should be allowed to pursue its claims of fraud, misrepresentation, and unjust enrichment.

“We review a district court's grant of summary judgment de novo, giving the nonmoving party the most favorable reading of the record as well as the benefit of [all] reasonable inferences that arise from the record.” Gentry v. Georgia-Pacific Corp., 250 F.3d 646, 649 (8th Cir.2001). “Summary judgment is appropriate only when there is no genuine issue of material fact and the moving party is entitled to judgment as a matter of law.” Viking Supply v. Nat'l Cart Co., 310 F.3d 1092, 1095 (8th Cir.2002). Disputes that are not “genuine,” or that are about facts that are not “material,” will not preclude summary judgment. See Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 247-48, 106 S.Ct. 2505, 91 L.Ed.2d 202 (1986). In a diversity action such as this, we apply state substantive law. See Gylten v. Swalboski, 246 F.3d 1139, 1141 (8th Cir.2001). Our task is not to answer the factual question of whether an agreement between Eng and Acho actually existed. Rather, we must determine whether this agreement, if it did exist, complies with the Missouri Rules of Professional Conduct, and, if not, whether CMDA's counterclaims can stand.

A.

“Attorney's fees are not owned, they are earned.” Neilson v. McCloskey, 186 S.W.3d 285, 287 (Mo.Ct.App.2005) (quotation and alteration omitted). If two attorneys from different firms wish to share the fees generated from a single case, they may do so “only if based on a sharing of services or responsibility.” Londoff v. Vuylsteke, 996 S.W.2d 553, 557 (Mo.Ct.App.1999). This principle is embodied in Missouri Supreme Court Rule 4-1.5(e), also known as Missouri Rule of Professional Conduct 1.5(e), which, at the time this alleged agreement between Acho and Eng was made, provided:

A division of fee between lawyers who are not in the same firm may be made only if:
(1) the division is in proportion to the services performed by each lawyer or, by written agreement with the client, each lawyer assumes joint responsibility for the representation;
(2) the client is advised of and does not object to the participation of all the lawyers involved; and
(3)
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